Council tax rise fear over £1.5bn shortfall

TOWN halls today revealed they have a £1.5bn black hole in their budgets - raising fears of more council tax increases.

Local authorities say they will not be able to keep running services unless they can make up the shortfall. They have appealed to Gordon Brown to bail them out.

Today they warned that unless the Treasury helps, they will be forced to impose heavy council tax increases to raise the money.

Council tax bills have risen by 70% since 1997, with bills in London expected to jump another 4% on average this year. It means average band D bills in the capital are likely to hit £1,175 in April. But today it emerged that councils do not believe this will be nearly enough to meet costs. The Local Government Association claims the Treasury has failed to take account of new cost pressures brought about by changes such as generous pay packages for teachers.

Other drains on services include a £200m rise in the cost of dealing with waste, rising costs in services for children and the elderly, and a huge shortfall in local authority pension funds. The association is appealing to the Treasury to make up the shortfall. Members want the Chancellor to set a generous long-term package in next month's Budget - ending the need for last-minute awards to bail councils out.

Sir Sandy Bruce-Lockhart, the LGA's chairman, said: 'If local government is to continue to improve, it must no longer be left to stumble from one year to the next with lastminute financial fixes from central government.

'We need a longer term financial solution that takes the pressure off council tax payers and puts the responsibility to deliver efficiency and effectiveness firmly with accountable local councils.'

The scale of the alleged shortfall, revealed in today's Financial Times, will dismay homeowners who are already facing massive hikes when properties are re-valued.

The 're-banding' exercise could push some bills up by more than £300 a year.

Steady rises in bills since 1997 have turned council tax into a major political issue - with both the Liberal Democrats and the Tories offering generous concessions.

Earlier this week the Conservatives announced plans to slash bills for the over-75s by up to 50%.

Ministers recognise the risk of a voter backlash and warned town halls to keep bills as low as possible.